A Theory of Small Campaign Contributions

NBER Working Paper No. 24413Issued in March 2018, Revised in August 2018NBER Program(s):Political Economy

We propose a formal model of small campaign contributions driven by an electoral motive, that is, by the possible influence of contributions on the outcome of an election. Electoral considerations produce strategic interactions among contributors, even when each donor takes as given the actions of other donors. These interactions induce patterns of individual contributions that are in line with empirical findings in the literature. For instance, equilibrium contributions increase when the support for the two candidates is more equal—a “closeness effect”—and relative contributions for the advantaged party are smaller than their underlying advantage—an “underdog effect.” We then study the impact of different forms of campaign finance laws. We show that caps affect small donors even if they are not directly capped, and that it may be optimal to combine caps with a progressive tax on contributions. We also indicate why our results may have implications for empirical studies of campaign contributions.

If you usually get free papers at work/university but do not at home,
you can either
connect to your work VPN or proxy (if any) or elect to have a link to the paper
emailed to your work email address below. The email address must be
connected to a
subscribing college, university, or other subscribing institution.
Gmail and other free email addresses will not have access.